The T2125 for sole proprietors: how your books map to each line
Which T2125 line each of your income and expense accounts belongs on, from 8000 gross sales to 9936 CCA and 9945 home office, plus the 2027 filing and payment dates.
8 min read · October 24, 2026
What the T2125 is
If you run a business on your own or in a partnership without incorporating, you report its income on Form T2125, Statement of Business or Professional Activities, filed with your personal T1 return. It is really a profit and loss statement in the CRA's layout: income at the top, expenses by line number, net income at the bottom.
The easiest T2125 is the one your chart of accounts already matches. If each expense account in your books lines up with one T2125 line, the form becomes a copy job from your profit and loss for January 1 to December 31. If your accounts mix things the CRA wants separately, you end up sorting receipts in April.
One rule first: if you are registered for GST/HST and claim input tax credits, leave the GST/HST out of both income and expenses. Your books should already keep it in its own liability account.
Income: lines 8000 to 8299
| Line | What goes there | From your books |
|---|---|---|
| 8000 | Adjusted gross sales or professional fees | Sales and fee income accounts, net of returns, discounts and GST/HST |
| 8290 | Reserves deducted last year | From last year's return, not your books |
| 8230 | Other income | Interest on business accounts, recovered bad debts, recapture of CCA, other small income |
| 8299 | Gross business or professional income | The total; it goes on line 13499 (business), 13699 (professional) or 13899 (commission) of your T1 |
Cost of goods sold
If you sell products, Part 4 of the form works out cost of goods sold: opening inventory (line 8300), purchases (8320), direct wage costs (8340), subcontracts (8360) and other costs (8450), less closing inventory (8500), giving line 8518. Gross profit is line 8519. Your opening and closing inventory come from your stock count at the start and end of the year; the purchases and costs come from your cost of goods sold accounts. A service business skips this part.
Expenses: lines 8521 to 9270
| Line | T2125 label | Typical accounts |
|---|---|---|
| 8521 | Advertising | Ads, website, promotional printing |
| 8523 | Meals and entertainment | Client meals and events; enter the deductible part, generally 50% |
| 8590 | Bad debts | Invoices written off that were already counted as income |
| 8690 | Insurance | Business liability and property insurance (not vehicle or home) |
| 8710 | Interest and bank charges | Loan interest, bank fees, card processing fees |
| 8760 | Business taxes, licences, and memberships | Business licences, professional dues |
| 8810 | Office expenses | Small office items such as postage and printer ink |
| 8811 | Office stationery and supplies | Paper, supplies used up in the business |
| 8860 | Professional fees | Accounting, legal and consulting fees |
| 8871 | Management and administration fees | Fees paid for managing or running the business |
| 8910 | Rent | Rent for business premises or equipment |
| 8960 | Repairs and maintenance | Repairs to business property and equipment |
| 9060 | Salaries, wages, and benefits | Employee gross pay and your share of CPP and EI (not your own drawings) |
| 9180 | Property taxes | Taxes on business property other than your home |
| 9200 | Travel expenses | Airfare, hotels, transit for business trips |
| 9220 | Utilities | Phone, internet, power for business premises |
| 9224 | Fuel costs (except for motor vehicles) | Heating fuel, fuel for equipment |
| 9275 | Delivery, freight, and express | Courier and shipping |
| 9270 | Other expenses | Software subscriptions and anything without its own line; list what it is |
Two common mistakes: owner drawings are not an expense (they go in an equity account, see owner draws), and equipment is not an expense in the year you buy it. It goes on the balance sheet and is claimed through CCA.
CCA, vehicle and home office
- Line 9281, motor vehicle expenses (not including CCA): fuel, insurance, licence, repairs, lease payments and loan interest for the vehicle, times your business-use percentage. Keep a logbook of business kilometres; see the 2026 mileage rates.
- Line 9936, capital cost allowance: the tax version of depreciation, worked out by CCA class on the form's Area A. It does not have to equal the depreciation in your books, so your accountant usually works it out separately.
- Line 9368 and 9369: total expenses, and net income before adjustments.
- Line 9945, business-use-of-home expenses: the business share of heat, power, insurance, maintenance, mortgage interest and property tax (or rent) for the part of your home you use for work. It is claimed after net income and cannot create or increase a business loss; any excess carries forward. Net income after it is line 9946, which goes on line 13500, 13700 or 13900 of your T1.
When to file and pay
For the 2026 tax year, if you (or your spouse or common-law partner) had self-employment income and your business year ends December 31:
- File your T1 with the T2125 by Tuesday, June 15, 2027.
- Pay any balance owing by Friday, April 30, 2027. Interest starts on May 1, even though the return is not due until June.
- If you also file GST/HST annually with the same year-end, the same pair of dates applies to that return. See the 2027 tax calendar for Canada.
In AcboBooks
You can set up the chart of accounts so each income and expense account matches one T2125 line, and name or number accounts to match (for example, an account called "8523 Meals and entertainment"). Then the profit and loss for the calendar year lists the figures in T2125 order, every number opens the transactions behind it, and you can export it to Excel for your preparer. GST/HST stays in its own payable and input tax credit accounts, out of income and expenses.
What it does not do: AcboBooks does not fill in or file the T2125, does not work out CCA by class (its fixed asset schedule uses straight-line book depreciation), and does not apply the 50% meals limit or your vehicle and home business-use percentages. Those adjustments are made on the form itself.
Source: CRA Form T2125 (2025) and guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income; CRA 2026 tax-year deadlines. The 2026 version of the form is published in early 2027; check it for any changed line before you file.
A chart of accounts that lines up with your return
AcboBooks keeps GST/HST out of your income and expenses, gives you a profit and loss for the calendar year, and exports it to Excel for your preparer.
This article is general information, not tax, legal or accounting advice. Rules and dates change; check the official source or ask your accountant before acting.
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